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The Impact of Artificial Intelligence on Trading and Finance

By Gordon Cheung, Deputy Chief Executive, SBMA and Avirath Kakkar, Head of Strategy, EIS Global Capital Management

Published on September 19, 2018

– How Artificial Intelligence Has Revolutionised Trading

It may look like there is no rhythm or reason and I’m just making unrelated investments. But there is a unifying reason. It’s AI. AI is coming like a big bang. Every industry will be redefined. – Masayoshi Son, founder and CEO, SoftBank

What long-term vision do big trading houses share?

  • Vision Fund, founded by Masayoshi Son in 2017 with $100 billion, invests in artificial intelligence (AI) technologies and robotics.
  • Trading giants like Bridgewater Associates, Renaissance Technologies, Cidatel and D.E. Shaw use AI-driven automated trading strategies to generate remarkably high returns.
  • More than 60% of the staff working for XTX Markets, a leading electronic market maker in a wide range of asset classes behind prime brokers, are data scientists and algorithm engineers.
  • JP Morgan Chase’s Contract Intelligence (COiN) uses deep learning algorithms to analyse and review over 10,000 credit documents in seconds. The bank also established a Machine Learning department to develop AI technologies for its banking operations.
  • Wells Fargo set up an AI Enterprise Solutions team to run its innovation lab.

Now, how many AI concepts, apart from algorithm and high-frequency trading (HFT), are you familiar with? They include machine learning algo, deep learning algo, big data, regression (applied by most HFT firms), classification algo, decision trees, supervised and unsupervised learning, and neural networks, just to name a few.

It is widely believed that the finance industry was the first sector to use artificial intelligence and machine learning in the early ‘90s. The revolution, which started to pick up speed in early 2016, has not only shifted the entire trading landscape, but also transformed the whole financial ecosystem.

AI application development in general, including trading, is about teaching machines to learn, think, reason, quantify sentiment, analyse data and news (even black swan incidents), generate insights and make decisions automatically with high accuracy and speed.

Today, machine learning and deep learning play an increasingly important role in calibrating trading portfolios to match strategic and risk objectives. In fact, automated strategies can eliminate all the deficiencies of manual trading. Traders no longer need to strain their optic and brain nerves non-stop during a trading session. Thomson Reuters estimates that algorithmic trading systems now handle 75% of trades worldwide.

Many quant trading firms use machine learning algorithms on data feeds for automated trades. It makes perfect sense that they are protective of their AI algorithm properties and high-speed technologies – everyone is looking to capture the same handful of market prices that appear and disappear in nanoseconds.

As an investor, you want your algo to know when to enter and exit a trade. As a directional trader, you would like your algo to be smarter and faster than your competitors in reacting to breaking news or a financial datum that can move the markets. As an arbitrageur, you want your algo to be the speediest to simultaneously buy and sell in two markets before a targeted price differential is traded away by your rivals. Trading firms want maximal trading revenues and minimal operational and market risks.

It’s not too late to start embracing what’s going on in the data science realm and equipping yourselves with algorithmic trading skills.

– Meeting Artificial Intelligence Technology at the Crossroads

Finance as an industry is remarkably advanced in collecting and storing data, much more than most others and it’s only a question of time when AI technologies are deployed at scale.

What exactly is behind all the excitement surrounding artificial intelligence? Is it just media hype? Is it meant to power a few Silicon Valley stocks? Is it just another thing that too shall pass?

The answer to all the above is, quite emphatically, NO. The excitement is about our civilization being at a very important crossroads. A crossroads arrived at after years of advancement in neuroscience, computing, and mathematical algorithms. Let’s see how.

The one thing that differentiates us from other species is the state of development of the frontal cortex. When opened up, it’s probably no bigger than a paper napkin. But it’s because of this frontal cortex that we have developed art, sciences, culture and technology to the extent that no other (known) species has been able to. Now bear in mind, the frontal cortex evolves and grows. A newborn baby doesn’t know as much as an average adult. An average adult today knows more than the average adult 500 years ago. The point being, that the frontal cortex can be trained to acquire knowledge.

Ok that’s one part. But here’s where it gets exciting.

Machine learning algorithms have been around for a long time – at least since the 1960s – and have always been modelled on how the human brain works. However it is only now, with advances in brain scanning technologies, that we can study in great detail how exactly the 300 million neurons in our brain work. We are in a position to monitor what each cell is doing, which external stimuli is triggering which set of cells and how these cells are processing the stimuli that inform our thoughts, moods and actions.

So if we know in great detail how our brain works, and if we know we can teach it to perform really complex tasks (remember, we teach our babies all the time), then what’s to stop us from replicating it. And if we can replicate it and it doesn’t need to be confined to the size of a paper napkin, then its power will be exponentially greater than what we have now. Its impact on civilisation will be astronomical.

That’s not all.

With the advances in nanotechnology (and maybe cloud computing), we will be able to physically compress the above into extremely small devices. According to the inventor and futurist Ray Kurweil, by 2030 these small devices will be physically integrated into our brains. So within a few years, we won’t just have 300 million neurons to do our thinking, we will be able to access 300 billion non-biological neurons to help us think.

The above, coupled with sizable improvements in the algorithms, will provide a strong tailwind. Some of us probably have already noticed the evolution in Google search results. It has evolved from performing complex web searches in a fraction of a second, to giving suggestions as to what may interest us (memory), and following up with us on our past searches and actually interpreting our requests.

Developing an AI business requires time, significant computing power and sizable amounts of data. Finance, as an industry, is remarkably advanced in collecting and storing data more frequently than most others and it’s only a question of time when the above technologies are deployed at scale.

Let’s take a step back. As a trader – and I think I speak for other fellow traders as well – I have always wanted to know how best to effectively model all the inputs I consider before executing a trade, how best to position size, how to manage risks, and little tricks that could give an edge in trading. AI algorithms provide rigorous techniques for addressing the above concerns.

SBMA will be organising a workshop on “Artificial Intelligence Application in Algorithmic Trading”. Please visit http://bit.ly/2wHUwjX for more information.

Gordon Cheung has over 25 years of trading experience in the interbank bullion market. Before joining SBMA as its Deputy CEO in March 2018, he spent 12 years as the head of trading and hedge fund sales at leading bullion banks in Singapore and Hong Kong.

Avirath Kakkar is the Head of Strategy, EIS Global Capital Management, a mid-sized hedge fund in Singapore applying AI technologies to portfolio trading. He was previously a structured deal expert at JP Morgan and head of commodities options at ICBC Standard Bank Singapore.

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Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

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Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

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Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

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Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

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Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

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Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.